Italian Budget Law 2025

On December 28, 2024, the Italian Parliament approved the Italian Budget Law 2025, introducing a range of fiscal measures aimed at supporting families, workers, and businesses. This article highlights the most relevant provisions and their implications. Additionally, it provides an overview of the reforms and incentives that will shape Italy’s fiscal landscape in the coming years. 

Support for Household Incomes and Taxpayers

One of the cornerstone provisions of the 2025 Budget Law is the restructuring of personal income tax (IRPEF) rates. Notably, the reform streamlines the previous four-rate system into three, making the new structure as follows:

• 23% for incomes up to €28,000;
• 35% for incomes between €28,000 and €50,000;
• 43% for incomes above €50,000.

Moreover, the government has expanded the “no tax” threshold to €8,500 for employees and specific income categories. Consequently, this directly reduces the tax burden on lower-income households.

To further alleviate labour costs, the law introduces new tax breaks for employees:

• Workers earning under €20,000 annually are eligible for a non-taxable bonus ranging from 7.1% to 4.8% of their income.
• Employees earning between €20,000 and €40,000 can receive a €1,000 allowance, which is scaled down for incomes exceeding €32,000 and phased out entirely at €40,000.

Support for Families under the Italian Budget Law 2025

The 2025 Budget Law introduces several measures to strengthen social and financial support for families.

First, the government has extended the state-backed first home loan guarantee scheme through 2027. This measure primarily benefits young couples, large families, and individuals under 36.

Additionally, consumers who purchase high-efficiency appliances can claim a 30% rebate. The rebate is capped at €100 per item or €200 for families with an ISEE below €25,000.

Furthermore, the law enhances parental leave provisions and extends subsidies for working mothers. These steps aim to promote work-life balance and support families with young children.

The Italian Budget Law 2025 Introduces Changes to Tax Deductions

For higher-income taxpayers, the law introduces caps on tax deductions.

For instance:

• For incomes between €75,000 and €100,000, the maximum deduction is set at €14,000.
• For incomes between €100,000 and €120,000, the cap is reduced to €8,000.

There has also been a revision in deductions for dependents. For example, the budget eliminates deductions for children over 30, except for those with disabilities. Similarly, it limits tax relief for other dependents to cohabiting relatives.

However, certain deductions remain exempt from these caps. For example, healthcare expenses, mortgage interest payments on loans contracted before December 31, 2024, and energy-efficient renovations remain unaffected.

Construction and Real Estate Incentives in the Italian Budget Law 2025

The law extends and modifies tax breaks for property renovations and home improvements.

Renovation Bonus:

• In 2025, a 50% deduction applies to primary residences, while a 36% deduction applies to other properties.
• From 2026–2027, the rates are reduced to 36% for primary residences and 30% for other properties.

Furniture Bonus:
The 50% tax deduction on purchases of furniture and appliances related to renovations remains available in 2025. However, the spending cap is set at €5,000.

Provisions for Workers and Businesses

The Budget Law introduces several measures to promote employment and investment.

For instance, businesses can claim a 20% enhanced deduction for new permanent hires. This deduction rises to 130% for underrepresented groups such as victims of violence against women, youth, and individuals with disabilities.

Additionally, workers with children can claim tax-free fringe benefits up to €2,000 per year. Other workers have a limit of €1,000. Furthermore, relocation allowances for new hires moving over 100 kilometres are exempt from taxation for the first two years, up to €5,000 annually.

Finally, the government maintains the flat tax regime for self-employed individuals earning up to €85,000 annually. Workers can also combine this with employment or pension income up to €35,000.

Incentives for Investments and Innovation

The 2025 Budget Law includes targeted measures to stimulate economic growth.

For instance, the law introduces a reduction in the corporate tax rate of 20%. However, businesses must reinvest at least 80% of profits, with 30% allocated to investments in advanced technologies and sustainable development.

Furthermore, financial incentives aim to boost the tourism sector. These incentives focus on promoting sustainable tourism, digital transformation, and extending tourist seasons.

Additionally, small and medium enterprises (SMEs) pursuing stock market listings or acquiring strategic assets in southern Italy can claim enhanced tax credits. These credits cover advisory costs and equipment purchases.

Cryptocurrency and Capital Gains Taxation

Starting January 1, 2026, authorities will increase the tax rate on cryptocurrency transactions from 26% to 33%. Additionally, the Italian Budget Law 2025 eliminates the €2,000 exemption threshold.

However, a transitional provision allows taxpayers to revalue their crypto holdings at January 1, 2025, values by paying an 18% substitute tax.

Finally…

The 2025 Italian Budget Law underscores the government’s focus on balancing fiscal responsibility with targeted support for households, businesses, and investments. Navigating these changes can be complex. Therefore, professional guidance may be essential to ensure compliance and maximize benefits.

At De Tullio Law Firm, our team of experts in Italian and cross-border tax, property, and inheritance matters is ready to assist. Contact us today for personalized advice on how the new regulations may impact you.